The financially embattled Australian insurer
QBE announced Thursday it is selling a portion of its US business for $90 million in order to free up more than $100 million in capital.
QBE will sell its ailing Mortgage & Lender Services business to New York insurer National General, which will pay $90 million for the mortgage insurance business. It plans to cut back the high costs of administration and revive what one analyst called “the worst dog in QBE” after it lost profitability in the wake of the housing market’s recovery.
Under terms of the agreement, National General will assume all the existing insurance liabilities of the mortgage insurance business.
The M&LS business had been for sale for some years, and the deal’s closure is expected to give BQE a much needed lift of 1 to 2 percent in the long term. The company says the deal will free up more than $100 million in capital, which it will use for investment elsewhere in its North American operations.
However, the sale will represent a pre-tax loss for QBE of about $120 million over two period as M&LS was being marketed prior to June 30. It will also mean a reduction of around $400 million in gowss written premium for QBE.
Company Chief Executive John Neal greeted the sale with enthusiasm, calling it one of “a range of strategic options with regard to the M&LS business in North America.”
“The sale of this business is a pleasing result as we look to focus on commercial lines and significantly build out our specialty underwriting capabilities in North America,” Neal said.
The news comes just six months after QBE announced the sale of its US agency business to Alliant Insurance Services for $217 million. That sale closed in early February of this year and was also hailed as “an important step of our capital plan,” according to Neal.
The transaction is expected to close September 30, pending regulatory approval.
